At any given moment, we will need a loan to help us meet our financial goals. Whether it is for personal use, for a major, big-ticket purchase, or get by to the next paycheck, it’s important that we find the right loan that will make purchasing easy and help improve our credit. Here is a list of various types of loans, how they function, and how it could be used to help you meet your needs.
Line of Credit Loan
A line of credit loan is similar to a credit card. You apply at a bank and they extend a line of credit to you in the form of a loan. You can access that line of credit at any given moment to use as you see fit. Requirements for a line of credit will vary a little bit based upon the bank, but most require that you are 18, have a good credit score, and meet specific income requirements. Some banks require that you have a checking or savings account with them. This type of loan is available to anyone who meets the requirements but is especially popular for the small business person who may need to access the credit for business purposes.
Same Day Loans
If you have bad credit and yet find yourself in dire need of help, the same day loan is what will most likely be available to you. They often don’t perform a background check and can process the loan the same day, usually within a few minutes to a couple of hours. They require that you are 18 years old and possess a checking account that can transfer payments back to them on an agreed schedule. This is often used by people who find themselves in need of paying a bill or covering their rent due to financial hardship. However, these types of loans are wrought with incredibly high-interest rates and equally high fees. You may borrow $600 initially but then pay $300/month over the next 6 months. These loans are not recommended if you can find any other way to cover your bill.
Pay Day Loans
Pay day loans are designed to help you bridge your finances in between paychecks. They are easy to obtain by simply being 18 and providing proof of income. These are often sought after by folks living paycheck to paycheck. However, like the same day loan, they are riddled with fees and high interest rates. More than likely, you will spend your entire next paycheck paying off your loan and then finding yourself still in dire need of money. It can be a vicious cycle that you do not want to find yourself in and we recommend you avoid these loans at all costs.
A personal loan is often obtained through the bank or credit union and provide you the ability to make a fairly large purchase, such as new computer equipment or to pay for car repairs. Others choose to use a personal loan to pay off outstanding debt so they can avoid higher interest rates. You must be 18 and verify your income, additionally proving that you have the income to pay off the loan. Many banks or credit unions require that you have a bank account with them, but not all do. Credit unions often offer discounts to your pay schedule if you have an account and agree to transfer the payments out of the account on the due date.
Before applying for any loan, inquire about interest rates! The better your credit, the better deals you can find. If you have credit that isn’t that great or even downright bad, ask if the creditor will be reporting your payments to the credit bureaus. If they are not, avoid taking the loan. You want to make timely payments and have it reported to improve your credit!